What is Accounting

Accounting is simply the means by

which we measure and describe
the results of economic
activities.

1
Objectives of Accounting & Finance
• Show Financial Position.
• Help in Making Decisions.
• To Show All the Transactions.
• Show Claims on the Company.
• To Show Organizational Performance.
• How the Economic Resources Being Used.
• How Management Performed Its Responsibilities.

2
• Basic Business Model
• The five elements of Accounting
• Coding
• The Balance Sheet Structure.
• Preparation of Balance Sheet

3
 Lucky Star Ltd.
Balance Sheet
As on December 31, 2001
ASSETS LIABILITIES
Current Assets Short Term Liabilities
Cash 69,000 Salary Payable 229,000
Other Receivables 409,000 Accrued Expense 243,000
Account Receivables 526,000 Dividend Payable 143,000
Inventory 610,000 Accounts Payable 131,000
Cash at Bank 100,000 Bank Notes Payables 5,000
Stores and Spares 120,000 Estimated Tax 254,000
Insurance Premium 220,000
Fixed Assets
Plant and Equipment 1,013,000 Long Term Liabilities
Investments 157,000 Other Liabilities 226,000
Capital Work in Progress 164,000 Bonds Payables 300,000

EQUITY
Ordinary Shares 538,000
Reserves 879,000
TOTAL 3,168,000 TOTAL 3,168,000
4
 OVERNIGHT AUTO SERVICE
+ OWNER’S
ASSETS = LIABILITIES EQUITY
+Account +Tools & Notes +Accounts +Capital
Date Cash Receivable + Land +Building Equipment = Payable Payable Stock
Nov 1 + 80,000 = + 80,000
Balance 80,000 = 80,000
Nov 3 - 52,000 + 52,000 =
Balance 28,000 52,000 = 80,000

Nov 5 - 6,000 + 36,000 = + 30,000

Balance 22,000 52,000 36,000 = 30,000 80,000

Nov 17 + 13,800 = + 13,800

Balance 22,000 52,000 36,000 13,800 = 30,000 13,800 80,000

Nov 20 + 1,800 - 1,800 =

Balance 22,000 1,800 52,000 36,000 12,000 = 30,000 13,800 80,000

Nov 25 + 600 - 600 =

Balance 22,600 1,200 52,000 36,000 12,000 = 30,000 13,800 80,000
Nov 30 - 6,800 = - 6,800

Balance 15,800 1,200 52,000 36,000 12,000 = 30,000 7,000 80,000